Pitney Bowes' New Cash Tender Offers - Analyst Blog
March 12 2013 - 2:50PM
Zacks
Pitney Bowes
Inc. (PBI) announced a cash tender
offer for some of its Notes. These include any or all of its 4.875%
Medium-Term Notes due 2014, 5.000% Notes due 2015 and 4.750%
Medium-Term Notes due 2016. All these notes are issued by Pitney
Bowes.
In addition to the terms and conditions set by the company’s
Offer to Purchase dated Feb 26, 2013, and the related Letter of
Transmittal, the company has also expressed its intentions to start
a new offer and sell new debt securities through an underwritten
public offering.
Unless extended or terminated earlier, the offer will expire on
Mar 25, 2013. The proceeds from the new debt security issue along
with the company’s cash in hand will be utilized to finance the
buyback of the notes validly tendered.
Currently, there is a $1350 million aggregate principal amount
of Notes outstanding that the company intends to buy. The revised
maximum series tender cap for the notes were $0.2 billion for the
2014 notes, $0.14 billion for the 2015 notes and $ 0.075 billion
for the 2016 notes.
As per the tender offer, the holders who surrender their notes
at or prior to 5 p.m., New York City time, on Mar 11, 2013 (unless
extended), will be qualified to receive the ‘Total Consideration’
on the notes, indicating an early tender payment of $30 per $1,000
principal amount of the Notes on all such notes.
For notes tendered after the Early Tender Date but prior to 5
p.m., New York City time, on Mar 25, 2013 (unless extended),
holders will be eligible to receive only the applicable Total
Consideration, less the applicable Early Tender Payment on the
Settlement Date.
Goldman Sachs & Co. (GS), and J.P.
Morgan Securities (JPM) are the joint dealer manager
agents for the Tender Offers. Additionally, Global Bondholder
Services Corporation is acting as solicitation and information
agent for the Offers.
During the last few quarters the company has been incurring huge
capital expenditure, which significantly affected its free cash
flow balance. Free cash flow was also impacted by higher working
capital requirements, due to the timing of disbursements and less
of a benefit from finance receivables. The continuing economic
uncertainty remains a matter of concern.
A sizeable portion of Pitney Bowes’ total borrowings have been
issued in the commercial paper markets. Although Pitney Bowes
continues to have unencumbered access to these markets, the current
economic uncertainties may affect its borrowing power.
Given its deteriorating cash flows and aggressive capex plans,
it makes sense for PBI to cut down its debt as a part of its
capital management plan. The resultant extension of maturities
would also support its cash balances.
Pitney Bowes currently has a Zacks Rank #4 (Sell), so it might
not be a good stock to consider at the moment. However, some other
companies that are worth looking into include Tyco
International (TYC) which has a Zacks Rank #2 (Buy) and
Symantec Corp. (SYMC), which has a Zacks Rank #1
(Strong Buy).
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
PITNEY BOWES IN (PBI): Free Stock Analysis Report
SYMANTEC CORP (SYMC): Free Stock Analysis Report
TYCO INTL LTD (TYC): Free Stock Analysis Report
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